Rural E‐commerce and County Economic Development in China

• Published date: 01 September 2023
• Author: Qiuxia Qin,Hongdong Guo,Xinjie Shi,Kevin Chen
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/cwe.12501

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 26–60, Vol. 31, No. 5, 2023

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*Qiuxia Qin, PhD Candidate, China Academy for Rural Development, School of Public Affairs, Zhejiang

University, China. Email: 11922025@zju.edu.cn; Hongdong Guo, Professor, China Academy for Rural

Development, School of Public Aff airs, Zhejiang University, China. Email: guohongdong@zju.edu.cn; Xinjie

Shi (corresponding author), Assistant Professor, China Academy for Rural Development, School of Public

Affairs, China and Research Center for Common Prosperity, Future Regional Development Laboratory,

Innovation Center of Yangtze River Delta, Zhejiang University, China. Email: xjshi1990@zju.edu.cn;

Kevin Chen, Professor, China Academy for Rural Development, School of Public Aff airs, Zhejiang University,

China and International Food Policy Research Institute, East and Central Asia Offi ce, China. Email: kzchen@

zju.edu.cn. This research was supported financially by the National Natural Science Foundation of China

(No. 72003170), the National Social Science Fund of China (No. 21&ZD091), the Major Project of the Key

Research Base for Humanities and Social Sciences of the Ministry of Education (No. 22JJD790077), and the

Fundamental Research Funds for the Central Universities in China.

Rural E-commerce and County Economic

Development in China

Qiuxia Qin, Hongdong Guo, Xinjie Shi, Kevin Chen*

Abstract

With the proliferation of information and communication technology in rural areas,

rural e-commerce has gradually become a new economic phenomenon in China. Using

the national rural e-commerce comprehensive demonstration policy as a quasi-natural

experiment, this study examines the causal linkage between rural e-commerce and

county-level economic development in China. Its fi ndings, which draw on county-level

panel data from 2011 to 2018, indicate that the policy had a positive eff ect on the county-

level economy in China, resulting in an overall increase in county GDP by 3.5 percent

(0.7 percent annually). Our analysis further shows that the impact of the policy diff ered

along the region and human capital dimensions. Further analysis reveals that industrial

structure and nonagricultural employment were the main channels for the policy to

exert a county-level economic impact. Infrastructure improvement in China also plays

an important role. The fi ndings emphasize the importance of advancing e-commerce in

rural areas to stimulate county-level economic development.

Keywords: county economy, e-commerce, quasi-natural experiment, rural China

JEL codes: D04, H0, Q0

I. Introduction

The popularization of information and communication technology (ICT), particularly the

extensive use of the Internet and intelligent phones, has become increasingly important

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Rural E-commerce Comprehensive Demonstration Policy 27

in countries’ social and economic development (Jensen, 2007; Deichmann et al., 2016;

Hjort and Poulsen, 2019). The adoption of e-commerce is recognized as an effective

way to narrow urban–rural disparities and achieve the goal of rural revitalization, as it

has a radical eff ect on economic development (Aker, 2010; Liu et al., 2015; Zhang et al.,

2018). E-commerce in rural China boomed during the 2010s and has substantially

affected the livelihood of rural residents (Qi et al., 2019). This is likely because

rural e-commerce expands markets to the countryside and helps increase the income

of rural dwellers. The Chinese government has realized the important role of rural

e-commerce and has adopted it as a tool for local economic development. For instance,

the national rural e-commerce comprehensive demonstration (NREC) policy, a concrete

national project that focuses on the subsidization of poverty-stricken zones to burgeon

e-commerce, was enacted in 2014. The impacts of the proliferation of rural e-commerce

in China are exemplifi ed by comprehensive policy demonstration and the surge in rural

e-commerce and its latent capacity for social-economic development.

With the proliferation of ICT in the rural areas of the developing world, rural

e-commerce has gradually become a new economic phenomenon, not only in China

but also in Mexico (Marlen et al., 2020), India (Lele and Goswami, 2017), Turkey

(Yaşlak et al., 2021), and other developing countries. In addition to China, many

countries have introduced policies to encourage the use of ICT to promote agricultural

and rural development. For example, the UK and the European Union have

implemented the Digital Village Program (Roberts et al., 2017), and in the developing

world, countries such as Iran and India, have implemented the Rural ICT Center

Program (Niavand and Nia, 2017). The expansion of rural e-commerce has received

signifi cant attention from scholars and policymakers in developed countries since the

popularization of ICT in the 1990s (Mueller, 2001). This attention was followed by

a rapidly growing body of literature focusing on Chinese rural e-commerce since the

2010s (Zhang et al., 2018).

The literature on China’s rural e-commerce follows two main themes. The first

theme examines how e-commerce clusters form and evolve, and what influences the

adoption of e-commerce in rural areas. A great many of these empirical studies have

investigated decisive factors regarding the evolution of the Taobao villages (Leong et al.,

2016; Lin, 2019), which are associated with entrepreneurship, social innovation, supply

networks, and Internet use (Zeng and Guo, 2016a, b; Wei et al., 2019; Ma et al., 2020).1

For instance, Zeng and Guo (2016a, b) adopted the case study method to highlight

1Taobao villages are villages where the number of active online stores exceeds the number of local households

by 10 percent and where annual e-commerce transactions exceeds RMB10 million.

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that e-commerce associations played a pivotal role in the evolution of Taobao villages.

Zeng et al. (2019) used survey data to test the intermediary effect of acquaintance

societies and social networks in rural e-commerce development. Lin (2019) studied the

impact of e-commerce and population migration on the social spatial transformation

of Taobao village and found that ICT infrastructure and social networks constituted the

basis of rural e-commerce development. Further, regional inequality was introduced in

the research on China’s rural e-commerce development (Zhu et al., 2016). In summary,

based on case studies or descriptive studies with restricted data, most scholars have

investigated the current circumstances, development modes, existing issues, and policy

implications of rural e-commerce development in China (Lin et al., 2016; Tang and

Zhu, 2020).

The second expanding theme in the literature concerns the infl uences of e-commerce

applications on social and economic gains in rural China. Of the studies that considered

the relationship between e-commerce and economic gain, most found that e-commerce

played an important role in enhancing farmers’ income and economic gains, poverty

alleviation, and the promotion of balanced growth in the city and countryside. For

instance, Zeng et al. (2019) used survey data to examine the impact of e-commerce

adoption on household income in rural China and found that the income of the

households that adopted e-commerce in agricultural product sales was significantly

higher than that of their counterparts. This echoes Luo and Niu (2019), who further

confirmed that the adoption of rural e-commerce increased household revenue, and

Li et al. (2021), who found that the income of e-commerce adopters was signifi cantly

higher than that of nonadopters, and the considerable increase in sales revenue was

one of the main contributors to such large income gains. However, there are also

some contradictory findings. For instance, Couture et al. (2021), using a survey

based on microdata regarding household and store prices supplemented by transaction

records from a large Chinese village firm’s internal database, found that farmers did

not gain many economic benefits in the stochastic expansion of Taobao’s coverage

through Alibaba’s Rural Taobao Program. This is mainly because the benefi ts brought

by e-commerce are driven by reductions in the cost of retail consumption rather than

increases in household income.

China’s strategy of using e-commerce as a tool to boost rural development has been an

important source of inspiration for other developing countries (Lele and Goswami, 2017).

Despite the inconsistent conclusions, most existing studies – including those stated

above – utilized data sets from the level of Taobao villages and households. Taobao

villages are typical cases of villages that adopt e-commerce in rural China, but they are

not representative, and such studies ignore the traits of non-Taobao villages. To learn